David Chaplin 's Opinion

A personal finance columnist for the NZ Herald

Inside Money: Super model fashion choices - cardigans v bikinis

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Australia is about to jump five years ahead of New Zealand when it comes to eligibility for a pension. Photo / Thinkstock
Australia is about to jump five years ahead of New Zealand when it comes to eligibility for a pension. Photo / Thinkstock

As the Labour Party looks across the Tasman for superannuation inspiration, another Australian "independent think-tank" (they appear popular there) has cast an envious glance our way.

The Australian Institute report (sent my way via the Auckland University-based Retirement Policy and Research Centre) - 'Sustaining us all in retirement: the case for a universal age pension - advocates for the scrapping of Australia's tax-incentivised compulsory super system in favour of something like the NZ model.

Under the Australia Institute plan, super tax concessions (currently costing at about A$40 billion per year) would go, although compulsory savings would stay, to fund a Kiwi-style non means-tested government pension.

The paper claims Australia's current super system is expensive, unwieldy and inequitable while New Zealand's does a half-decent job of keeping the aged out of extreme poverty.
Admittedly, the Australian Institute report says, New Zealand "has relatively low rates of income replacement among middle and upper income groups [in retirement]" compared to Australia.

"While this is a potential criticism of the NZ system, the strength of the criticism depends on a basic philosophical question: that is, should we be concerned with poverty among the aged or with deprivation relative to one's previous standard of living?," the paper says. "It is not entirely clear that government policy should prioritise the latter rather than the former, especially if you take the view that individuals can make their own decisions about their desired level of retirement savings."

There is, of course, practically zero probability of any Australian government implementing such a plan: the entrenched interests are just too strong.

However, the report does contrast some of the positive aspects of New Zealand's reliable cardigan-wearing pension system against the glamorous bikini-clad high-maintenance Australian super model: New Zealand and glamour have never really mixed that well anyway.

David Chaplin

A personal finance columnist for the NZ Herald

David is a freelance journalist who has covered the financial services business on both sides of the Tasman for over 15 years. David has edited magazines and websites for the financial advice, investment and superannuation industries. Today, he contributes to various publications in Australia as well as his bi-weekly blog for the NZ Herald under the 'Inside Money' banner.

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